Atlas Copco AB is one of the world's leading producers of compressors, mining and construction equipment, industrial power tools, and assembly systems. Atlas Copco has gone through several transformations since its founding in 1873 as AB Atlas. It was initially a specialized manufacturer of railway equipment but switched at the beginning of the 20th century to diesel engines and pneumatic products. The production of diesel engines was abandoned after World War II, allowing the company to concentrate on the pneumatic equipment sector and erect an extensive international sales network that has made Atlas Copco into one of Sweden's biggest multinational concerns. More recently, the company made a major move into the drilling equipment business via a 2004 acquisition, divested its professional electric tools business in early 2005, and for a decade, from 1997 to 2006, delved into the construction equipment rental sector. Closely connected to the Wallenberg banking dynasty, Atlas Copco had to call on its financial support to weather several severe crises during its existence prior to World War II. In the postwar period, the profitability of Atlas Copco has improved greatly, despite a few temporary setbacks. By the early 21st century, Atlas Copco had more than 50 production sites in approximately 20 countries, while its sales network spanned more than 150 markets around the world.

19TH-CENTURY BEGINNINGS

AB Atlas was established in 1873 to supply equipment for the Swedish railways, with two factories located in Stockholm and Södertälje. Atlas was the brainchild of Eduard Fränckel, the chief engineer for Swedish State Railways (SJ), who became the company's first managing director. A second key figure behind Atlas was D. O. Francke, a Gothenburg industrialist and financier who headed the banking enterprise Göteborgs Handelskompani. The biggest shareholder in Atlas was André Oscar Wallenberg, the founder of Sweden's first commercial bank, Stockholms Enskilda Bank. Wallenberg had involved the bank in financing a number of railway construction projects and his interest in Atlas was a natural extension of this activity.

Atlas was soon the largest manufacturing company in Sweden in terms of production capacity. The large size of Atlas's planned operations reflected the optimistic outlook for the country's economy. The industrial revolution was gaining momentum in Sweden in the early 1870s, and engineering firms were enjoying their first sustained period of profits. Atlas was entering a crowded field when it came to transportation equipment. Although it was profitable until 1877, Atlas then plunged into a deficit because of falling orders from Swedish state and private railways as the country entered a recession in the late 1870s.

Atlas's losses mounted during the 1880s as economic growth remained weak. Göteborgs Handelskompani, which was suffering financial reverses, gradually reduced its stake in Atlas, while Stockholms Enskilda Bank kept the company afloat through loans and consequently increased its control. A solution to Atlas's financial problems was difficult because the company was saddled with large and costly production facilities and faced fierce competition in the market for railway equipment and other heavy industrial goods at a time of economic slowdown. The company's situation revealed that "the initial investment in Atlas had not only been made at the wrong time but also in the wrong industry," corporate historian Professor Torsten Gårdlund concluded.

Burdened with excess production capacity, Atlas had to find other business besides making railway carriages. It produced steel and wrought-iron parts for bridges and other structures and made an unsuccessful diversification into marine steam engines and boilers by buying a shipyard in Gävle in a drastic attempt to develop more profitable product lines. When these efforts produced poor results, the Södertälje and Gävle facilities were closed and activity was concentrated in Stockholm. In 1887 the Wallenbergs ousted company President Fränckel, who had been criticized for lax management, and replaced him with Oscar Lamm, a mining engineer.

With Atlas continuing to suffer losses and Stockholms Enskilda Bank having a significant part of its assets tied up in the company, Knut Wallenberg, who had become head of the bank on his father's death in 1886, decided at the end of 1890 to allow Atlas to be liquidated. The shareholders lost their investment, and the bank suffered heavy losses as its creditor. A new company named Nya AB Atlas (New Atlas Company) took over its assets, with Stockholms Enskilda Bank subscribing for the major part of the share capital. Under the firm control of the Wallenbergs, Nya AB Atlas became the cornerstone for the family's industrial empire, which eventually embraced most of Sweden's multinational corporations.

After the financial reorganization, the company developed a new specialty, heating ducts for buildings. It also began production of steam engines, steam locomotives, and machine tools. With the dawn of the 20th century it gradually phased out most of these products, including its original business of railway equipment (from which the company exited in 1917), as it continued to change its product mix. It focused instead on two promising areas, oil-driven engines and air machinery and compressors. Production of compressed air equipment began in 1901, and, by the start of World War I, pneumatic products had become the company's dominant business area. Gunnar Jacobsson, who oversaw the development of this division, became the president of Nya Atlas in 1909, succeeding Lamm.

NEW PRODUCTS AND CORPORATE STRUCTURES IN A NEW CENTURY

In an attempt to improve the production and sales of oil-driven engines, its other main product area, Nya Atlas merged in 1917 with AB Diesels Motorer, which had been founded by the Wallenbergs in 1898 to acquire the Swedish patent rights for the engine developed by the German engineer Rudolf Diesel. Atlas had cooperated with Diesels Motorer from the beginning in developing the engine for commercial use, while acquiring a minority stake in the engine concern. Diesels Motorer first developed a stationary engine for power generation, followed later by a marine engine. After several difficult years during which large investments were needed to perfect the engine, Diesel Motorer reported its first profit in 1906 and found growing export markets in both the United States and Russia as sales of the marine engine climbed.

COMPANY PERSPECTIVES

The Atlas Copco Group is a world leading provider of industrial solutions. In close cooperation with its customers, Atlas Copco fulfils its mission to innovate for superior productivity. The offering ranges from compressed air and gas equipment, generators, construction and mining equipment, industrial tools and assembly systems, to related aftermarket services and equipment rental.

The creation of the new company, AB Atlas Diesel, came at a time when demand for its products was strong because of World War I, producing good prices and profits, as neutral Sweden supplied both sides of the conflict. The merger also meant that Stockholms Enskilda Bank, which owned two-thirds of Nya Atlas and half of Diesels Motorer, could gain a profit from its long-term investment in the two concerns while retaining 40 percent of the share capital in the new company, which was now valued at two-and-a-half times the worth of the combined figures of its component companies. Nya Atlas President Jacobsson was appointed head of the new company.

Atlas Diesel began life with a healthy order book. The company's exports were dominated by diesel engines, which accounted for four-fifths of total foreign sales. These consisted mainly of marine engines supplied to the Allied nations to power their naval vessels. The end of the war brought with it a weakening in the business cycle. Deflationary policies were adopted in major export markets, and deliveries to Russia were disrupted by revolution and civil war. By 1920, profits were practically nonexistent; during the next four years the company ran up heavy losses as the diesel engine business in particular suffered setbacks.

Debts mounted and Stockholms Enskilda Bank had to provide further credit. The company embarked on a cost-cutting program, selling its headquarters in Stockholm and reducing its workforce from a peak of 1,450 in 1917 to 240 in 1923. With the company regarded as overcapitalized, the share capital was drastically reduced from SEK 220 million to SEK 10 million in 1923 and SEK 5 million in 1925. To reduce the debt burden, most of the old Atlas facilities were then sold, and the production of compressors and pneumatic products was moved to the southern Stockholm suburb of Sickla, where Diesel had its factories.

The completion of the financial reorganization and concentration of production at Atlas Diesel occurred as Sweden was emerging from the economic crisis of the early 1920s. Sales improved for both pneumatic products and engines, but interest payments and depreciation charges kept profits low. Moreover, Atlas Diesel was concentrating its resources on the diesel engine business, although sales of pneumatic tools were providing almost all of the profits. Management, dominated by engineers, favored investment in diesel engines because it was the company's most technologically advanced product group and therefore enjoyed great prestige. The company thus was in a poor financial position to withstand the effects of the 1930s Great Depression, which hit it with devastating effect. Atlas Diesel once again plunged into a deficit, and there were discussions about shutting down the company. Instead, Stockholms Enskilda Bank, the principal owner, decided to recapitalize the company.

The company's operations were modernized and rationalized under the strict supervision of the Wallenbergs, with emphasis placed on expanding the profitable pneumatic side of the business. Profitability recovered during the second half of the 1930s because of an improvement in the business cycle resulting from rearmament programs across Europe. Sales of pneumatic tools tripled between 1935 and 1939, while engine sales doubled. Dividends were paid to shareholders in 1935, for the first time since 1919.

KEY DATES

1873:

AB Atlas is established to supply equipment for the Swedish railways.

1890:

Company goes into liquidation but is immediately reborn as Nya AB Atlas.

1901:

Production of compressed air equipment begins.

1917:

Company exits from its original business of railway equipment and merges with AB Diesels Motorer to form AB Atlas Diesel.

1936:

Company pioneers the Swedish method of rock drilling.

1948:

Diesel engine division is sold.

1956:

Company changes its name to Atlas Copco AB; Belgian compressor company Arpic Engineering NV is acquired.

1968:

Company is reorganized into three groups focusing on mining and construction equipment, tools, and compressors.

A second U.S.-based equipment rental firm, Rental Service Corporation, is acquired.

2004:

Company acquires the Ingersoll-Rand Drilling Solutions business.

2005:

Atlas Copco divests its professional electric tools business.

2006:

Company's North American equipment rental business is sold.

In 1940 Gunnar Jacobsson, who had been president for more than 30 years, stepped down and was replaced by Walter Wehtje, a close friend of Marcus Wallenberg, Jr., the board chairman. Wehtje continued shifting the focus of the company from diesel engines, which had grown so technologically complex that their sales could not even cover their manufacturing costs, to the compressed air division, which had become the company's sales leader at the beginning of the 1930s and accounted for two-thirds of sales by the end of the decade. Nevertheless, the engine business was expanded during World War II as Atlas Diesel supplied motors for torpedo boats, and hydraulic gears used in other military equipment for the Swedish armed forces.

POST-WAR DEVELOPMENTS

In the early postwar years, Wehtje decided that the company's manufacturing of diesel engines could not continue, and in 1948 the diesel engine division was sold to Nydqvist & Holm. Simultaneously, Wehtje decided to expand the air compressor division, sales for which had already doubled during World War II, by setting up a network of sales subsidiaries and agents around the world. This network was to be complemented by an expansion of production capacity in Sweden and the acquisition of manufacturing plants abroad. By this time, the company's compressed air tools had reached a high technical standard after years of research. In 1936 it had pioneered a new technique of rock drilling, called the Swedish method, by combining a lightweight rock drill with a tungsten carbide bit. This product, developed in cooperation with Sandvik, would soon help Atlas Diesel penetrate international markets.

Manufacturing capacity was increased by purchasing several troubled factories in Sweden to ease the production bottleneck at the Sickla facility. Atlas Diesel also acquired its biggest manufacturing site abroad in 1956 when it bought the Belgian compressor company Arpic Engineering NV, in Antwerp.

Although it had disposed of the diesel engine business, the company retained the name Atlas Diesel until 1956 when it was changed to Atlas Copco AB. Copco stood for Compagnie Pneumatique Commerciale, the name of a Belgian subsidiary that had been adopted in its abbreviated form by a number of Atlas affiliates in other countries.

By the mid-1950s, Wehtje's strategy of international expansion was paying off with exports accounting for 65 percent of total sales. In 1957 Wehtje retired at the age of 60, having seen sales increase from SEK 20 million to SEK 315 million, the number of subsidiaries triple to 24, and the workforce expand from 1,500 to 6,000. His successor was Kurt-Allan Belfrage, a former diplomat and deputy managing director.

During the 1960s, the company's annual sales more than tripled from SEK 380 million to SEK 1.28 billion. As market demand grew, plants were acquired in Denmark, Italy, India, Brazil, Spain, and Mexico in addition to the existing facilities overseas in the United Kingdom, Finland, and Belgium. Popular products included portable compressors and new pneumatic hand tools in addition to rock drilling equipment. More than 80 percent of Atlas Copco's sales were outside Scandinavia. Profits fluctuated during the 1960s because of increased costs, such as sharply rising wages, research and development investment, and marketing activity.

Atlas Copco underwent a reorganization in 1968 in an effort to promote decentralized management, with the company split into three basic groups: Atlas Copco MCT (mining and construction equipment), Atlas Copco Tools (industrial technology), and Atlas Copco Airpower (compressors). When Belfrage retired in 1970, the company's workforce had grown to 13,000 with a presence in 34 countries.

Erik Johnsson, the deputy manager for sales, was appointed the new president. He was replaced in 1975 by Tom Wachtmeister, who had held several senior positions in the company, including director of corporate planning. Strong global demand resulted in sales more than quadrupling during the 1970s. Atlas Copco reported a turnover of SEK 5.3 billion by the end of the decade.

RATIONALIZED OPERATIONS

Atlas Copco was put to the test in the early 1980s when a worldwide recession left the company reeling with a sharp fall in profits in 1982 and 1983. Wachtmeister oversaw a stringent rationalization program that included shutting down one-quarter of the company's 46 factories and shedding one-fifth of the 20,000-strong workforce. He also decided to shift the product emphasis away from mining equipment, which had generated 65 percent of the turnover in the late 1970s but had suffered a sizable drop in sales during the recession.

Atlas Copco experienced a recovery in profits in 1984 and 1985 because of renewed demand in Western Europe as well as the devaluation of the Swedish krona in 1982, an important development for a company that generated 92 percent of its sales outside Sweden. Atlas Copco suffered another setback in profits in 1986 because of unexpected foreign exchange losses.

The company's results improved sharply in the late 1980s. Between 1987 and 1989, earnings climbed by 109 percent to SEK 1.53 billion. The upswing in the company's fortunes could be traced to its strategy of concentrating on its core product areas, unlike its more diversified rivals. The strategy reflected Wachtmeister's belief that Atlas Copco should dominate every market segment in which it was active. It also stemmed from the policy within the Wallenberg sphere that companies belonging to it should not compete with each other. This policy prevented Atlas Copco from expanding into the related area of robotics, which was the preserve of another Wallenberg concern, ASEA AB (later known as ABB AB, the Swedish half of ABB Asea Brown Boveri Ltd. and a major player in the worldwide power generation and electrical power transmission and distribution industries).

Starting in 1987, Atlas Copco began acquiring other companies to build up its market position, particularly concentrating on widening the product line in the Atlas Copco Tools division, which was headed by Michael Treschow. Treschow adopted a strategy of acquiring top brands and by the early 1990s had transformed the Tools division into the multibrand Industrial division. The major acquisitions that shaped the Industrial division through 1991 were: U.S.-based Chicago Pneumatic Tool Co., which was acquired in 1987 and instantly made Atlas Copco the world's largest maker of compressed air tools and assembly systems; SA Ets Georges Renault, acquired in 1988, a French maker of industrial tools, primarily grinding/sanding machines and small assembly systems; and U.K.-based Desoutter Brothers plc, a manufacturer of a broad range of industrial tools and assembly units. In acquisitions outside of the industrial tools sector, Atlas in 1988 took over Secoroc, a manufacturer of rock-drill bits. This purchase led to a price war with the Swedish concern Sandvik, which formerly cooperated with Atlas Copco in marketing drill bits.

RECESSION AND ACQUISITIONS

In 1991 Treschow took over as chief executive from Wachtmeister. The new leader immediately had to contend with the deep recession of the early 1990s. He reacted with a massive restructuring, cutting the workforce by 30 percent, with the number of employees bottoming out at 18,104 in 1994. Treschow also gave each Atlas Copco division manager complete worldwide responsibility for his division, with profit and loss statements and balance sheets compiled for each so that individual performance could be measured. Through these steps, Atlas Copco remained in the black throughout the recession, despite a revenue decline of 25 percent from 1990 to 1993.

During and in the immediate years after the recession, Atlas Copco continued to aggressively pursue acquisitions. The Industrial division gained additional breadth through the acquisition of two makers of electric tools: AEG Elektrowerkzeuge of Germany (in 1992) and Milwaukee Electric Tool (in 1995). The latter, a $550 million deal, was the largest purchase in Atlas Copco history and brought to the company a privately held group that claimed more than 20 percent of the U.S. electric tool market for industrial and professional use. Atlas Copco also created a number of joint ventures in the emerging nation of China from 1993 through 1997, encompassing construction machinery, compressors, and electric power tools.

In early 1997 Treschow left Atlas Copco to become chief executive at AB Electrolux, after that company had lost its chief executive to AB Volvo. Replacing Treschow was the head of Atlas Copco's Compressor division, Giulio Mazzalupi, a native of Italy. The first non-Swede to lead Atlas Copco, Mazzalupi wasted no time making his mark on the company, engineering another record acquisition, that of Prime Service, Inc., which was bought for $900 million in mid-1997. Acquiring Prime Service, the number two U.S. industrial equipment rental company, extended Atlas Copco into equipment rental, a rapidly growing sector in the United States, where increasing numbers of companies were renting equipment rather than purchasing it. Moving into rental provided Atlas Copco with a different method of reaching its same customers. Among Prime Service's rental products were air compressors, forklift trucks, mechanical loaders, light construction equipment, and power tools. Following the acquisition and through the end of 1998, Prime Service acquired eight equipment rental companies in the United States and Mexico with aggregate annual revenues of SEK 900 million ($114 million). Initially part of the Compressor division, Prime Service became the core of the newly formed Rental Service division, which constituted a fourth business area for Atlas Copco.

Through the acquisitions of Chicago Pneumatic, Milwaukee Electric Tool, Prime Service, and other U.S. companies, Atlas Copco had significantly expanded its North American activities. In the early 1990s only about 15 percent of company revenues had been generated in North America, but that figure had increased to 37 percent by 1998, nearly equaling that of Europe (which stood at 40 percent). Thanks in large measure to the strongly performing Prime Service, Atlas Copco's revenues reached SEK 33.74 billion ($4.28 billion), a 12 percent increase over the previous year, and operating profits hit SEK 4.35 billion ($552 million), an increase of 14 percent.

Atlas Copco significantly bolstered its new Rental Service division through the July 1999 purchase of another major U.S. equipment rental firm, Rental Service Corporation, for $730 million in cash and the assumption of $900 million in debt. The acquisition was a so-called white-knight takeover that thwarted a hostile bid from the largest equipment rental firm in the United States, United Rentals, Inc. At the time of the acquisition, Rental Service was operating 270 equipment rental locations in 29 states, and its 1998 revenues had totaled $579 million. Following the deal, Atlas Copco ranked as the second largest equipment rental firm in North America, behind United Rentals. By 2000, more than half of Atlas Copco's revenues were being generated in North America, and Rental Service was generating 30 percent of total sales, just behind the 31 percent of the firm's core compressor business.

REFOCUSING ON CORE BUSINESSES IN THE EARLY 21ST CENTURY

From 2000 to 2002 a number of smaller acquisitions were completed to augment existing product lines or extend the firm's geographic reach. One effort focused on seeking growth in emerging markets, particularly China and Russia. In April 2002, for example, Atlas Copco purchased Liuzhou Tech Machinery Co. Ltd., a Chinese compressor manufacturer. The company also acquired Krupp Berco Bautechnik GmbH, a maker of hydraulic breakers and demolition tools for the construction industry, in June 2002. Krupp Berco, based in Germany with annual revenues of approximately SEK 600 million ($57 million), was subsequently renamed Atlas Copco Construction Tools GmbH.

In July 2002 Mazzalupi retired after 31 years with Atlas Copco. Succeeding him was Gunnar Brock, the former head of Tetra Pak Group, a global packaging giant. Brock came onboard at an inauspicious time, with a global economic downturn in full swing. Atlas Copco's push into the North American equipment rental business had lost a good portion of its original appeal as the nonresidential building market in the United States went into a sharp decline, pulling the Rental Service division down with it. By the time Brock took over, it had become clear that the company had paid too much for Prime Service and Rental Service during the bull market of the late 1990s. In October 2002, then, Atlas Copco wrote off SEK 6.8 billion ($782 million) of goodwill on these acquisitions, which sent the company into a net loss for the year of SEK 3.89 billion ($442 million). Revenues for 2002 fell 7 percent, to SEK 47.56 billion ($5.41 billion).

Global economic conditions gradually improved in 2003 and 2004, as did Atlas Copco's financial performance. Under Brock's leadership, the company placed increased importance on research and development and the introduction of new products and services, and it also focused more intently on developing more environmentally friendly products and processes. In June 2004 Atlas Copco moved into a new field via the acquisition of the Ingersoll-Rand Drilling Solutions business of Ingersoll-Rand Company Limited for SEK 1.7 billion ($225 million). The acquired unit, based in Garland, Texas, was a manufacturer of drilling equipment used in construction, mining, quarrying, and water-well drilling. Its annual revenues were around SEK 2.2 billion ($300 million). As part of Atlas Copco, it became the Drilling Solutions division of the Construction and Mining Technique business area.

Another hallmark of the Brock era was a narrowing of the company's focus to those areas in which it held market leading positions on a global scale. One area identified as not fitting this criteria was the professional electric tools business, which consisted of Atlas Copco Electric Tools of Germany and the U.S.-based Milwaukee Electric Tool, and which generated revenues in 2004 totaling SEK 5.46 billion ($819 million). Thus in January 2005 Atlas Copco sold this business to Hong Kong-based Techtronic Industries Ltd. for $713 million. Atlas retained its industrial power tools business.

Early the following year, Atlas Copco placed its Rental Service business up for sale, citing a lack of synergy with the rest of the group's operations and the non-global nature of the division, which conducted business only in North America. In November 2006 the company sold Rental Service to the private equity firms Ripplewood Holdings L.L.C. and Oak Hill Capital Management, LLC, for SEK 24 billion ($3.5 billion), while retaining a 14.5 percent stake in the business. Following these two major divestments, Atlas Copco was significantly smaller but with strong positions in compressors, mining and construction equipment, industrial power tools, and assembly systems.

Atlas Copco AB is one of the world’s leading producers of compressors, mining and construction equipment, power tools, assembly systems, and motion control products. The company is also active in the rental equipment and service sector. Atlas Copco has gone through several transformations since its founding in 1873 as AB Atlas. It was initially a specialized manufacturer of railway equipment but switched at the beginning of the 20th century to diesel engines and pneumatic products. The production of diesel engines was abandoned after World War II, allowing the company to concentrate on the pneumatic equipment sector and erect an extensive international sales network that has made Atlas Copco into one of Sweden’s biggest multinational concerns. Closely connected to the Wallenberg banking dynasty, Atlas Copco had to call on its financial support to weather several severe crises during its existence prior to World War II. In the postwar period, the profitability of Atlas Copco has improved greatly, despite a few temporary setbacks.

19th-century Beginnings

AB Atlas was established in 1873 to supply equipment for the Swedish railways, with two factories located in Stockholm and Södertälje. Atlas was the brainchild of Eduard Fränckel, the chief engineer for Swedish State Railways (SJ), who became the company’s first managing director. A second key figure behind Atlas was D.O. Francke, a Gothenburg industrialist and financier who headed the banking enterprise Göteborgs Handelskompani. The biggest shareholder in Atlas was André Oscar Wallenberg, the founder of Sweden’s first commercial bank, Stockholms Enskilda Bank. Wallenberg had involved the bank in financing a number of railway construction projects and his interest in Atlas was a natural extension of this activity.

Atlas was soon the largest manufacturing company in Sweden in terms of production capacity. The large size of Atlas’s planned operations reflected the optimistic outlook for the country’s economy. The industrial revolution was gaining momentum in Sweden in the early 1870s and engineering firms were enjoying their first sustained period of profits. Atlas was entering a crowded field when it came to transportation equipment. Although it was profitable until 1877, Atlas then plunged into a deficit due to falling orders from Swedish state and private railways as the country entered a recession in the late 1870s.

Atlas’s losses mounted during the 1880s as economic growth remained weak. Göteborgs Handelskompani, which was suffering financial reverses, gradually reduced its stake in Atlas, while Stockholms Enskilda Bank kept the company afloat through loans and consequently increased its control. A solution to Atlas’s financial problems was difficult since the company was saddled with large and costly production facilities and faced fierce competition in the market for railway equipment and other heavy industrial goods at a time of economic slowdown. The company’s situation revealed that “the initial investment in Atlas had not only been made at the wrong time but also in the wrong industry,” corporate historian Professor Torsten Gårdlund concluded.

Burdened with excess production capacity, Atlas had to find other business besides making railway carriages. It produced steel and wrought-iron parts for bridges and other structures and made an unsuccessful diversification into marine steam engines and boilers by buying a shipyard in Gävle in a drastic attempt to develop more profitable product lines. When these efforts produced poor results, the Södertälje and Gävle facilities were closed and activity was concentrated in Stockholm. In 1887 the Wallenbergs ousted company president Fränckel, who had been criticized for lax management, and replaced him with Oscar Lamm, a mining engineer.

With Atlas continuing to suffer losses and Stockholms Enskilda Bank having a significant part of its assets tied up in the company, Knut Wallenberg, who had become head of the bank on his father’s death in 1886, decided at the end of 1890 to allow Atlas to be liquidated. The shareholders lost their investment, and the bank suffered heavy losses as its creditor. A new company named Nya AB Atlas (New Atlas Company) took over its assets, with Stockholms Enskilda Bank subscribing for the major part of the share capital. Under the firm control of the Wallenbergs, Nya AB Atlas became the cornerstone for the family’s industrial empire, which now embraces most of Sweden’s multinational corporations.

After the financial reorganization, the company developed a new specialty, heating ducts for buildings. It also began production of steam engines, steam locomotives, and machine tools. With the dawn of the 20th century it gradually phased out most of these products, including its original business of railway equipment, as it continued to change its product mix. It focused instead on two promising areas, oil-driven engines and air machinery and compressors. Production of compressed air equipment began in 1901, and, by the start of World War I, pneumatic products had become the company’s dominant business area. Gunnar Jacobsson, who oversaw the development of this division, became the president of Nya Atlas in 1909, succeeding Lamm.

New Products and Corporate Structures in a New Century

In an attempt to improve the production and sales of oil-driven engines, its other main product area, Nya Atlas merged in 1917 with AB Diesels Motorer, which had been founded by the Wallenbergs in 1898 to acquire the Swedish patent rights for the engine developed by the German engineer Rudolf Diesel. Atlas had cooperated with Diesels Motorer from the beginning in developing the engine for commercial use, while acquiring a minority stake in the engine concern. Diesels Motorer first developed a stationary engine for power generation, followed later by a marine engine. After several difficult years during which large investments were needed to perfect the engine, Diesel Motorer reported its first profit in 1906 and found growing export markets in both the United States and Russia as sales of the marine engine climbed.

The creation of the new company, Atlas Diesel, came at a time when demand for its products was strong due to World War I, producing good prices and profits, as neutral Sweden supplied both sides of the conflict. The merger also meant that Stockholms Enskilda Bank, which owned two-thirds of Nya Atlas and half of Diesels Motorer, could gain a profit from its long-term investment in the two concerns while retaining 40 percent of the share capital in the new company, which was now valued at two-and-a-half times the worth of the combined figures of its component companies. Nya Atlas President Jacobsson was appointed head of the new company.

Atlas Diesel began life with a healthy order book. The company’s exports were dominated by diesel engines, which accounted for four-fifths of total foreign sales. These consisted mainly of marine engines supplied to the Allied nations to power their naval vessels. The end of the war brought with it a weakening in the business cycle. Deflationary policies were adopted in major export markets and deliveries to Russia were disrupted by revolution and civil war. By 1920, profits were practically nonexistent; during the next four years the company ran up heavy losses as the diesel engine business in particular suffered setbacks.

Debts mounted and Stockholms Enskilda Bank had to provide further credit. The company embarked on a cost-cutting program, selling its headquarters in Stockholm and reducing its workforce from a peak of 1,450 in 1917 to 240 in 1923. With the company regarded as overcapitalized, the share capital was drastically reduced from SKr 220 million to SKr 10 million in 1923 and SKr 5 million in 1925. To reduce the debt burden, most of the old Atlas facilities were then sold and the production of compressors and pneumatic products was moved to the southern Stockholm suburb of Sickla, where Diesel had its factories.

Company Perspectives

The long-term goal of the Atlas Copco Group is to become the world’s leading company within its specialist areas of business. The Group’s business concept is to provide a broad range of products and services, which meet the needs of customers in the areas of: air and gas compression, as well as air treatment; industrial manufacturing and the automotive after-market; rock excavation, light construction and demolition; installation, repair and service.

The completion of the financial reorganization and concentration of production at Atlas Diesel occurred as Sweden was emerging from the economic crisis of the early 1920s. Sales improved for both pneumatic products and engines, but interest payments and depreciation charges kept profits low. Moreover, Atlas Diesel was concentrating its resources on the diesel engine business, although sales of pneumatic tools were providing almost all of the profits. Management, dominated by engineers, favored investment in diesel engines because it was the company’s most technologically advanced product group and therefore enjoyed great prestige. The company thus was in a poor financial position to withstand the effects of the 1930s Great Depression, which hit it with devastating effect. Atlas Diesel once again plunged into a deficit, and there were discussions about shutting down the company. Instead, Stockholms Enskilda Bank, the principal owner, decided to recapitalize the company.

The company’s operations were modernized and rationalized under the strict supervision of the Wallenbergs, with emphasis placed on expanding the profitable pneumatic side of the business. Profitability recovered during the second half of the 1930s due to an improvement in the business cycle resulting from rearmament programs across Europe. Sales of pneumatic tools tripled between 1935 and 1939, while engine sales doubled. Dividends were paid to shareholders in 1935, for the first time since 1919.

In 1940 Gunnar Jacobsson, who had been president for more than 30 years, stepped down and was replaced by Walter Wehtje, a close friend of Marcus Wallenberg, Jr., the board chairman. Wehtje continued shifting the focus of the company from diesel engines, which had grown so technologically complex that their sales could not even cover their manufacturing costs, to the compressed air division, which had become the company’s sales leader at the beginning of the 1930s and accounted for two-thirds of sales by the end of the decade. Nevertheless, the engine business was expanded during World War II as Atlas Diesel supplied motors for torpedo boats, and hydraulic gears used in other military equipment for the Swedish armed forces.

Postwar Developments

In the early postwar years, Wehtje decided that the company’s manufacturing of diesel engines could not continue, and in 1948 the diesel engine division was sold to Nydqvist & Holm. Simultaneously, Wehtje decided to expand the air compressor division, sales for which had already doubled during World War II, by setting up a network of sales subsidiaries and agents around the world. This network was to be complemented by an expansion of production capacity in Sweden and the acquisition of manufacturing plants abroad. By this time, the company’s compressed air tools had reached a high technical standard after years of research. It had pioneered a new technique of rock drilling, called the Swedish method, by combining a lightweight rock drill with a tungsten carbide bit. This product, developed in cooperation with Sandvik, would soon help Atlas Diesel penetrate international markets.

Manufacturing capacity was increased by purchasing several troubled factories in Sweden to ease the production bottleneck at the Sickla facility. Atlas Diesel also acquired its biggest manufacturing site abroad in 1956 when it bought the Belgian compressor company Arpic, in Antwerp.

Although it had disposed of the diesel engine business, the company retained the name Atlas Diesel until 1955 when it was changed to Atlas Copco AB. Copeo stood for Compagnie Pneumatique Commerciale, the name of a Belgian subsidiary that had been adopted in its abbreviated form by a number of Atlas affiliates in other countries.

By the mid-1950s, Wehtje’s strategy of international expansion was paying off with exports accounting for 65 percent of total sales. In 1957 Wehtje retired at the age of 60, having seen sales increase from SKr 20 million to SKr 315 million, the number of subsidiaries triple to 24, and the workforce expand from 1,500 to 6,000. His successor was Kurt-Allan Belfrage, a former diplomat and deputy managing director.

During the 1960s, the company’s annual sales more than tripled from SKr 380 million to SKr 1.28 billion. As market demand grew, plants were acquired in Denmark, Italy, India, Brazil, Spain, and Mexico in addition to the existing facilities overseas in the United Kingdom, Finland, and Belgium. Popular products included portable compressors and new pneumatic hand tools in addition to rock drilling equipment. More than 80 percent of Altas Copeo’s sales were outside Scandinavia. Profits fluctuated during the 1960s due to increased costs, such as sharply rising wages, research and development investment, and marketing activity.

Atlas Copco underwent a reorganization in 1968 in an effort to promote decentralized management, with the company split into three basic groups: Atlas Copco MCT (mining and construction equipment), Atlas Copco Tools (industrial technology), and Atlas Copco Airpower (compressors). When Belfrage retired in 1970, the company’s workforce had grown to 13,000 with a presence in 34 countries.

Erik Johnsson, the deputy manager for sales, was appointed the new president. He was replaced in 1975 by Tom Wachtmeister, who had held several senior positions in the company, including director of corporate planning. Strong global demand resulted in more than quadrupling sales during the 1970s. Atlas Copco reported a turnover of SKr 5.3 billion by the end of the decade.

Rationalized Operations in the 1980s

Atlas Copco was put to the test in the early 1980s when a worldwide recession left the company reeling with a sharp fall in profits in 1982 and 1983. Wachtmeister oversaw a stringent rationalization program that included shutting down one-quarter of the company’s 46 factories and shedding one-fifth of the 20,000-strong workforce. He also decided to shift the product emphasis away from mining equipment, which had generated 65 percent of the turnover in the late 1970s but had suffered a sizable drop in sales during the recession.

Atlas Copco experienced a recovery in profits in 1984 and 1985 due to renewed demand in Western Europe as well as the devaluation of the Swedish krona in 1982, an important development for a company that generated 92 percent of its sales outside Sweden. Atlas Copco suffered another setback in profits in 1986 due to unexpected foreign exchange losses.

The company’s results improved sharply in the late 1980s. Between 1987 and 1989, earnings climbed by 109 percent to SKr 1.53 billion. The upswing in the company’s fortunes could be traced to its strategy of concentrating on its core product areas, unlike its more diversified rivals. The strategy reflected Wachtmeister’s belief that Atlas Copco should dominate every market segment in which it was active. It also stemmed from the policy within the Wallenberg sphere that companies belonging to it should not compete with each other. This policy prevented Atlas Copco from expanding into the related area of robotics, which was the preserve of another Wallenberg concern, ASEA AB (later known as ABB AB, the Swedish half of ABB Asea Brown Boveri Ltd. and a major player in the worldwide power generation and electrical power transmission and distribution industries.)

Starting in 1987, Atlas Copco began acquiring other companies to build up its market position, particularly concentrating on widening the product line in the Atlas Copco Tools division, which was headed by Michael Treschow. Treschow adopted a strategy of acquiring top brands and by the early 1990s had transformed the Tools division into the multibrand Industrial division. The major acquisitions that shaped the Industrial division through 1991 were: U.S.-based Chicago Pneumatic Tool Co., which was acquired in 1987 and instantly made Atlas Copco the world’s largest maker of compressed air tools and assembly systems; SA Ets Georges Renault—acquired in 1988—a French maker of industrial tools, primarily grinding/sanding machines and small assembly systems; and U.K.-based Desoutter Brothers plc, a manufacturer of a broad range of industrial tools and assembly units. In acquisitions outside of the industrial tools sector, Atlas in 1988 took over Secoroc, a manufacturer of rock-drill bits. This purchase led to a price war with the Swedish concern Sandvik, which formerly cooperated with Atlas Copco in marketing drill bits.

Recession and Acquisitions in the 1990s

In 1991 Treschow took over as chief executive from Wachtmeister. The new leader immediately had to contend with the deep recession of the early 1990s. He reacted with a massive restructuring, cutting the workforce by 30 percent, with the number of employees bottoming out at 18,104 in 1994. Treschow also gave each Atlas Copco division manager complete worldwide responsibility for his division, with profit and loss statements and balance sheets compiled for each so that each manager’s performance could be measured. Through these steps, Atlas Copco remained in the black throughout the recession, despite a revenue decline of 25 percent from 1990 to 1993.

During and in the immediate years after the recession, Atlas Copco continued to aggressively pursue acquisitions. The Industrial division gained additional breadth through the acquisition of two makers of electric tools: AEG Elektro Werkzeuge of Germany and Milwaukee Electric Tool. The latter, a $550 million deal, was the largest purchase in Atlas Copco history and brought to the company a privately held group that claimed more than 20 percent of the U.S. electric tool market for industrial and professional use. Atlas Copco also created a number of joint ventures in the emerging nation of China from 1993 through 1997, encompassing construction machinery, compressors, and electric power tools.

In early 1997 Treschow left Atlas Copco to become chief executive at AB Electrolux, after that company had lost its chief executive to AB Volvo. Replacing Treschow was the head of Atlas Copco’s Compressor division, Giulio Mazzalupi, a native of Italy. Mazzalupi wasted no time making his mark on the company, engineering another record acquisition, that of Prime Service, Inc., which was bought for $900 million in mid-1997. Acquiring Prime Service, the number two U.S. industrial equipment rental company, extended Atlas Copco into equipment rental, a rapidly growing sector in the United States, where increasing numbers of companies were renting equipment rather than purchasing it. Moving into rental provided Atlas Copco with a different method of reaching its same customers. Among Prime Service’s rental products were air compressors, forklift trucks, mechanical loaders, light construction equipment, and power tools. Following the acquisition and through the end of 1998, Prime Service acquired eight equipment rental companies in the United States and Mexico with aggregate annual revenues of SKr 900 million ($114 million). Initially part of the Compressor division, Prime Service became the core of the newly formed Rental Service division, which constituted a fourth business area for Atlas Copco.

Through the acquisitions of Chicago Pneumatic, Milwaukee Electric Tool, Prime Service, and other U.S. companies, Atlas Copco had significantly expanded its North American activities. In the early 1990s only about 15 percent of company revenues had been generated in North America, but that figure had increased to 37 percent by 1998, nearly equaling that of Europe (which stood at 40 percent). Thanks in large measure to the strongly performing Prime Service, Atlas Copco’s revenues reached SKr 33.74 billion ($4.28 billion), a 12 percent increase over the previous year, and operating profits hit SKr 4.35 billion ($552 million), an increase of 14 percent. With the company’s continuing focus on growth through acquisition, these figures were likely to continue their upward trajectory.

Atlas Copco AB is one of the world’s leading producers of compressors, mining and construction equipment, and automated industrial tools. The company has gone through several transformations since its founding in 1873 as AB Atlas. It was initially a specialized manufacturer of railway equipment, but switched at the beginning of the 20th century to diesel engines and pneumatic products. The production of diesel engines was abandoned after World War II, allowing the company to concentrate on the pneumatic equipment sector and erect an extensive international sales network that has made Atlas Copco into one of Sweden’s biggest multinational concerns. Closely connected to the Wallenberg banking dynasty, Atlas Copco had to call on its financial support to weather several severe crises during its existence prior to World War II. In the postwar period, the profitability of Atlas Copco has improved greatly, despite a few temporary setbacks.

AB Atlas was established to supply equipment for the Swedish railways, with two factories located in Stockholm and Södertälje. Atlas was the brainchild of Eduard Fränckel, the chief engineer for Swedish State Railways (SJ), who became the company’s first managing director. A second key figure behind Atlas was D. O. Francke, a Gothenburg industrialist and financier who headed the banking enterprise Göteborgs Handelskompani. The biggest shareholder in Atlas was André Oscar Wallenberg, the founder of Sweden’s first commercial bank, Stockholms Enskilda Bank. Wallenberg had involved the bank in financing a number of railway construction projects and his interest in Atlas was a natural extension of this activity.

Atlas was soon the largest manufacturing company in Sweden in terms of production capacity. The large size of Atlas’s planned operations reflected the optimistic outlook for the country’s economy. The industrial revolution was gaining momentum in Sweden in the early 1870s and engineering firms were enjoying their first sustained period of profits. Atlas was entering a crowded field when it came to transportation equipment. Although it was profitable until 1877, Atlas then plunged into a deficit due to falling orders from Swedish state and private railways as the country entered a recession in the late 1870s.

Atlas’s losses mounted during the 1880s as economic growth remained weak. Göteborgs Handelskompani, which was suffering financial reverses, gradually reduced its stake in Atlas, while Stockholms Enskilda Bank kept the company afloat through loans and consequently increased its control. A solution to Atlas’s financial problems was difficult since the company was saddled with large and costly production facilities and faced fierce competition in the market for railway equipment and other heavy industrial goods at a time of economic slowdown. The company’s situation revealed that “the initial investment in Atlas had not only been made at the wrong time but also in the wrong industry,” one corporate historian, Professor Torsten Gårdlund, has concluded.

Burdened with excess production capacity, Atlas had to find other business besides making railway carriages. It produced steel and wrought-iron parts for bridges and other structures and made an unsuccessful diversification into marine steam engines and boilers by buying a shipyard in Gävle in a drastic attempt to develop more profitable product lines. When these efforts produced poor results, the Södertälje and Gävle facilities were closed and activity was concentrated in Stockholm. In 1887, the Wallenbergs ousted company president Fränckel, who had been criticized for lax management, and replaced him with Oscar Lamm, a mining engineer.

With Atlas continuing to suffer losses and Stockholms Enskilda Bank having a significant part of its assets tied up in the company, Knut Wallenberg, who had become head of the bank on his father’s death in 1886, decided at the end of 1890 to allow Atlas to be liquidated. The shareholders lost their investment and the bank suffered heavy losses as its creditor. A new company named Nya AB Atlas (New Atlas Company) took over its assets, with Stockholms Enskilda Bank subscribing for the major part of the share capital. Under the firm control of the Wallenbergs, Nya AB Atlas became the cornerstone for the family’s industrial empire, which now embraces most of Sweden’s multinational corporations.

After the financial reorganization, the company developed a new specialty, heating ducts for buildings. It also began production of steam engines, steam locomotives, and machine tools. After the turn of the century it gradually phased out most of these products, including its original business of railway equipment, as it continued to change its product mix. It focused instead on two promising areas, oil-driven engines and air machinery and compressors. Production of compressed air equipment began in 1901 and by the start of World War I, pneumatic products had become the company’s dominant business area. Gunnar Jacobsson, who oversaw the development of this division, became the president of Nya Atlas in 1909, succeeding Lamm.

In an attempt to improve the production and sales of oildriven engines, its other main product area, Nya Atlas merged in 1917 with AB Diesels Motorer, which had been founded by the Wallenbergs in 1898 to acquire the Swedish
patent rights for the engine developed by the German engineer Rudolf Diesel. Atlas had cooperated with Diesels Motorer from the beginning in developing the engine for commercial use, while acquiring a minority stake in the engine concern. Diesels Motorer first developed a stationary engine for power generation, later followed by a marine engine. After several difficult years during which large investments were needed to perfect the engine, Diesel Motorer reported its first profit in 1906 and found growing export markets in both the United States and Russia as sales of the marine engine climbed.

The creation of the new company, Atlas Diesel, came at a time when demand for its products was strong due to World War I, producing good prices and profits, as neutral Sweden supplied both sides of the conflict. The merger also meant that Stockholms Enskilda Bank, which owned two-thirds of Nya Atlas and half of Diesels Motorer, could gain a profit from its long-term investment in the two concerns while retaining 40% of the share capital in the new company, which was now valued at two and a half times the worth of the combined figures of its component companies. Nya Atlas President Jacobsson was appointed head of the new company.

Atlas Diesel began life with a healthy order book. The company’s exports were dominated by diesel engines, which accounted for four-fifths of total foreign sales. These consisted mainly of marine engines supplied to the Allied nations to power their naval vessels. The end of the war brought with it a weakening in the business cycle. Deflationary policies were adopted in major export markets and deliveries to Russia were disrupted by revolution and civil war. By 1920, profits were practically nonexistent; during the next four years the company ran up heavy losses as the diesel engine business in particular suffered setbacks.

Debts mounted and Stockholm Enskilda Bank had to provide further credit. The company embarked on a cost-cutting program selling its headquarters in Stockholm and reducing its work force from a peak of 1,450 in 1917 to 240 in 1923. With the company considered to be overcapitalized, the share capital was drastically reduced from SKr220 million to SkrlO million in 1923 and Skr5 million in 1925. To reduce the debt burden, most of the old Atlas facilities were then sold and the production of compressors and pneumatic products was moved to the southern Stockholm suburb of Sickla, where Diesel had its factories.

The completion of the financial reorganization and concentration of production at Atlas Diesel occurred as Sweden was emerging from the economic crisis of the early 1920s. Sales improved for both pneumatic products and engines, but interest payments and depreciation charges kept profits low. Moreover, Atlas Diesel was concentrating its resources on the diesel engine business, although sales of pneumatic tools were providing almost all of the profits. Management, dominated by engineers, favored investment in diesel engines because it was the company’s most technologically advanced product group and therefore enjoyed great prestige. The company thus was in a poor financial position to withstand the effects of the 1930s Depression, which hit it with devastating effect. Atlas Diesel once again plunged into a deficit, and there were discussions about shutting down the company. Instead, Stockholms Enskilda Bank, the principal owner, decided to recapitalize the company.

The company’s operations were modernized and rationalized under the strict supervision of the Wallenbergs, with emphasis placed on expanding the profitable pneumatic side of the business. Profitability recovered during the second half of the 1930s due to an improvement in the business cycle resulting from rearmament programs across Europe. Sales of pneumatic tools tripled between 1935 and 1939, while engine sales doubled. Dividends were paid to shareholders in 1935, for the first time since 1919.

In 1940, Gunnar Jacobsson, who had been president for more than 30 years, stepped down and was replaced by Walter Wehtje, a close friend of Marcus Wallenberg Jr., the board chairman. Wehtje’s brief was to continue shifting the focus of the company from diesel engines, which had grown so technologically complex that their sales could not even cover their manufacturing costs, to the compressed air division, which had become the company’s sales leader at the beginning of the 1930s and accounted for two-thirds of sales by the end of the decade. Nevertheless, the engine business was expanded during World War II as Atlas Diesel supplied motors for torpedo boats, and hydraulic gears used in other military equipment for the Swedish armed forces.

In the early postwar years, Wehtje decided that the company’s manufacturing of diesel engines could not continue, and in 1948 the diesel engine division was sold to Nydqvist & Holm. Simultaneously, Wehtje decided to expand the air compressor division, whose sales had already doubled during World War II, by setting up a network of sales subsidiaries and agents around the world. This network was to be complemented by an expansion of production capacity in Sweden and the acquisition of manufacturing plants abroad. By this time, the company’s compressed air tools had reached a high technical standard after years of research. It had pioneered a new technique of rock drilling, called the Swedish method, by combining a lightweight rock drill with a tungsten carbide bit. This product, developed in cooperation with Sandvik, would soon help Atlas Diesel penetrate international markets.

Manufacturing capacity was increased by purchasing several troubled factories in Sweden to ease the production bottleneck at the Sickla facility. Atlas Diesel also acquired its biggest manufacturing site abroad in 1956 when it bought the Belgian compressor company Arpic, in Antwerp.

Although it had disposed of the diesel engine business, the company retained the name Atlas Diesel until 1955 when it changed to the present Atlas Copco. Copco stood for Compagnie Pneumatique Commerciale, the name of a Belgian subsidiary that had been adopted in its abbreviated form by a number of Atlas affiliates in other countries.

By the mid-1950s, Wehtje’s strategy of international expansion was paying off with exports accounting for 65% of total sales. In 1957, Wehtje retired at the age of 60, having seen sales increase from SKr20 million to SKr315 million, the number of subsidiaries triple to 24, and the work force expand from 1,500 to 6,000. His successor was Kurt-Allan Belfrage, a former diplomat and deputy managing director.

During the 1960s, the company’s annual sales more than tripled from SKr380 million to SKrl.28 billion. As market demand grew, plants were acquired in Denmark, Italy, India, Brazil, Spain, and Mexico in addition to the existing facilities overseas in the United Kingdom, Finland, and Belgium. Popular products included portable compressors and new pneumatic
hand tools in addition to rock drilling equipment. More than 80% of Altas Copco’s sales were outside Scandinavia. Profits fluctuated during the 1960s due to increased costs, such as sharply rising wages, research and development investment, and marketing activity.

Atlas Copco underwent a reorganization in 1968 in an effort to promote decentralized management, with the company split into three basic groups: Atlas Copco MCT (mining and construction equipment), Atlas Copco Tools (industrial technology), and Atlas Copco Airpower (compressors). When Belfrage retired in 1970, the company’s work force had grown to 13,000 with a presence in 34 countries.

Erik Johnsson, the deputy manager for sales, was appointed the new president. He was replaced in 1975 by Tom Wachtmeister, who had held several senior positions in the company, including director of corporate planning. Strong global demand resulted in more than quadrupling sales during the 1970s. Atlas Copco reported a turnover of Skr5.3 billion by the end of the decade.

Atlas Copco was put to the test in the early 1980s when a worldwide recession left the company reeling with a sharp fall in profits in 1982 and 1983. Wachtmeister oversaw a stringent rationalization program that included shutting down one quarter of the company’s 46 factories and shedding one fifth of the 20,000-strong work force. He also decided to shift the product emphasis away from mining equipment, which had generated 65% of the turnover in the late 1970s but had suffered a sizable drop in sales during the recession.

Atlas Copco experienced a recovery in profits in 1984 and 1985 due to renewed demand in western Europe as well as the devaluation of the Swedish krona in 1982, an important development for a company with 92% of its sales from outside Sweden. Atlas Copco suffered another setback in profits in 1986 due to unexpected foreign exchange losses.

The company’s results have improved sharply since then. Between 1987 and 1989, earnings climbed by 109% to SKr 1.53 billion. The upswing in the company’s recent fortunes can be traced to its strategy of concentrating on its core product areas, unlike its more diversified rivals. The strategy reflects Wachtmeister’s belief that Atlas Copco should dominate every market segment in which it is active. It also stems from the policy within the Wallenberg sphere that companies belonging to it should not compete with each other. This policy prevented Atlas Copco from expanding into the related area of robotics, which is the preserve of ASEA, another Wallenberg concern.

Since 1987, Atlas Copco has been acquiring other companies to build up its market position. Takeover candidates have included Desoutter in the United Kingdom, Chicago Pneumatics in the United States, Secoroc in Sweden, and Georges Renault in France. Internal reorganization in the sales and administrative divisions, together with reduction of inventory stockpiles, have helped cut costs.

The air compressor division is now the biggest group within the company, generating 58% of the profits in 1989, while accounting for 46% of sales. Atlas Copco is Europe’s leading producer of air compressors and dominates the global market for oil-free rotary compressors. It recently established a joint venture with Iwata Air Compressor, giving it a foothold in the Japanese market. It lacks a significant presence in this product area in the United States.

The industrial technology group, which makes automated industrial tools, has also been targeted for expansion. The division, which now accounts for one-fifth of both sales and profits, was augmented by the acquisition of Chicago Pneumatics in 1988 and the United Kingdom’s Desoutter in 1989. Atlas Copco claims to be the world’s biggest producer of pneumatic tools with a strong market position in both Europe and the United States.

Intense competition and slow markets have hit mining and construction equipment, formerly one of the company’s top divisions. While it accounts for 33% of corporate sales, it generates only 22% of profits. In 1988, Atlas Copco acquired Secoroc, a manufacturer of rock-drill bits. The purchase led to a price war with the Swedish concern Sandvik, which formerly cooperated with Atlas Copco in marketing drill bits.

Atlas Copco remains financially strong and able to grow further through more takeovers. The company is optimistic about the 1990s since a host of infrastructure projects, such as improved motor and rail links in Europe, should mean increased sales. The company has warned that it might move its headquarters from Sweden if the country’s high production costs are not brought under control. Such a transfer would be relatively easy since 80% of its production is located abroad and its biggest division, Atlas Copco Airpower, is already based in Belgium.